- Biotech Boom: The pandemic has clearly elucidated the power of biology (in its good and bad), and we believe this event catalyzed the tailwinds that have been leading a Biotech boom. 2020 was a record-breaking year for biotech venture ($28B invested across 1071 deals, +60.5% YoY) and IPO’s (>$22B raised in public markets across >73 co’s). While we don’t know if this pace will continue, we believe this creates a virtuous investment cycle, pushing further investment and momentum in this sector. As such, we expect Applied Biology to continue being a strong thematic area in our portfolio.
- Logistics and Manufacturing: The pandemic highlighted the fragility of our global logistics, supply chain and manufacturing industries, particularly in pharma and biotech. We see this creating a demand for technologies that help with manufacturing scale-up and yield improvements in pharma manufacturing. We look forward to identifying innovations in areas such as digital transformation (AI, robotics), engineering (novel materials, chemistry) or biomanufacturing (synthetic biology).
- Digital Health: While telehealth and telemedicine have certainly become mainstream, we see opportunities in this space limited to lower fidelity data collection (video, images, text). The infrastructure challenges around connected medical devices and health data collection still remain and will continue to be a gating factor for rapid adoption of innovations in this space.
Momentum of Sustainability Investing
- Sustainability Tech Driven by EV: Sustainability investing similarly hit a record high in 2020, particularly in the US public markets. However, we believe most of the investment interest and drivers in sustainability technologies were driven by the EV sector and its surrounding supply chain (Batteries, Lidar, etc.). The EV sector is now reaching the “Slope of Enlightenment’’ in the Gartner Hype cycle. While this provides a new wave of opportunities for startup investment, the long R&D and development times of these technologies mean most of the companies with competitive market-ready technologies likely came up around 5–10 years ago out of the last “cleantech” crash.
- Sustainability Venture Investment is Regional: Sustainability venture investment in the US still remains a challenge at the Seed stage given the limited number of venture funds at the Seed and Series A+ stages. However, we have anecdotally observed growth in sustainability-focused venture capital within Europe and Asia, perhaps due to their own regional interests. We see this as an opportunity to collaborate and connect with partners on a global scale. Additionally, our hope is that success from the public markets leads to an increase of activity in early-stage venture investing.
- US Infrastructure Bill on the Horizon: With a potential $2T infrastructure bill (including $580B in manufacturing and R&D) being proposed by the current US administration, there will certainly be a number of related industries and sectors that will benefit from the investment. However, we feel it is too early to form opinions on how this will affect venture capital, and we’ll be watching this closely to see if it will (at all) benefit deep tech startups.
VC hits record high but Seed remains a Challenge
- Continuing on with records, venture capital also hit a record high in both investments ($130B raised by companies) and funds raised by firms ($73.1B across 321 funds). Yet, with median round sizes and fund sizes also jumping, most of the capital continues to shift towards later stage/larger financing rounds and mega-funds. We see this creating a gap in traditional Seed ($500K-$1M) and Series A ($5–15M) capital for deep tech startups. We don’t expect this to change but see this as an opportunity for active seed funds to identify and invest in the most promising startups in a more collaborative investment environment.